After a challenging 2016 when CSX Corp. worked to cut costs as freight volumes declined, Chairman and CEO Michael Ward is looking forward to the new year.
“I’m feeling much more optimistic about what ‘17’s going to produce for us,” Ward said in an interview Wednesday after the Jacksonville-based railroad company’s fourth-quarter earnings report.
His optimism includes the economic trends heading into 2017 and possible policy changes from the new presidential administration.
CSX late Tuesday reported fourth-quarter earnings of 49 cents a share, a penny higher than the fourth quarter of 2015. However, the 2016 fourth quarter, which officially ended Dec. 30, was a week longer than the 2015 fourth quarter, and the extra week increased earnings by 3 cents a share.
Ward said the extra week is a quirk in CSX’s fiscal calendar, which happens every six or seven years.
“Everybody hates it,” he said. “But we try to be as transparent as we can.”
CSX earned $1.81 a share for all of fiscal 2016, down from $2 in 2015 as revenue fell 6 percent to $11.1 billion.
However, as freight demand fell, CSX worked to offset the lower volumes with nearly $430 million in cost savings last year.
CSX’s employee head count dropped by about 3,000 from December 2015 to December 2016, with cutbacks throughout its operations in the Eastern U.S.
Ward said there were no layoffs at its corporate offices in Jacksonville.
“We did have some modest headcount reduction here but it was mostly attrition,” he said.
Ward said the company did cut about $50 million to $60 million in costs at the headquarters operations through productivity gains.
The $430 million in total cost savings also included a permanent annual savings of about $150 million from a conversion to longer trains and $100 million in cuts in operations in coal-producing regions as coal demand continued to drop.
CSX lost about $470 million in coal revenue last year, but Ward said domestic coal demand is expected to be flat this year.
“After the last five years, flat seems like up to me,” he said.
Ward said he is much more optimistic about the 85 percent of CSX’s business that is non-coal, particularly with U.S. industrial production turning slightly higher in the fourth quarter after declines earlier in 2016.
“We think it’s turning to a more positive — not overly robust — but a more positive environment,” he said.
The U.S. economy is projected to grow by 2 percent to 2.5 percent this year, which should translate into growth across CSX’s freight businesses, he said.
As Donald Trump becomes president Friday, Ward said he is hopeful about his policies that may relax regulation, reform the U.S. tax code and promote domestic manufacturing.
While CSX maintains its own tracks, Ward is also hoping to see improvements in the nation’s infrastructure, which would help its intermodal business.
“We need good highways. We need good ports,” he said.
Ward has one area of concern about Trump’s policies — possible restrictions on foreign trade.
“We’re a believer in free trade here at CSX,” he said.
However, Ward thinks Trump’s policies in general bode well for the economy this year.
“What happens to the economy in general is good for us,” Ward said.